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The Importance of Selecting the Correct Beneficiary in Estate Planning

Michael J. Lanza's avatar

Categories: Of Legal Interest Permalink

Choosing the wrong beneficiary could seriously impact the implementation of your estate plan.

Our firm prepares estate plans for our clients that utilize wills and sometimes trusts to accomplish their goals.  In this process it is very important to make sure the appropriate beneficiary has been named on assets such as life insurance policies, bank accounts and retirement plans.  The wrong choice could defeat the goals you want to accomplish.  For example, you establish a trust that provides in the event of your passing you want your estate assets to be managed by a trustee of your choosing for the benefit of any child under the age of twenty-five.  A very reasonable planning tool to allow a child to gain more maturity until he or she inherit your assets free of any restrictions.  However, if your child is named as the beneficiary, for example under a life insurance policy, the insurance policy’s death benefit could potentially go directly to your child when your child is no longer deemed a minor or reaching the age of eighteen.  Your goal of having a trustee manage your child’s finances until twenty-five has been circumvented by simply not having the correct beneficiary designation.

Another problem that I have seen in my practice is in divorce situations. Parties get divorced and one party fails to remove their ex-spouse as a beneficiary on a life insurance policy or retirement plan.  Under Connecticut law the divorce does not necessarily make this designation void and the ex-spouse ends up collecting the death benefit as the named beneficiary.     

Make sure that you have selected the correct beneficiary and contingent beneficiary or this could result in dire consequences in the implementation of your estate planning goals!

This article is for informational purposes only. It is not intended to be, nor should it be relied upon, for legal advice.